At every stage, however, export controls can slow the march or stop it dead in its tracks. Consider the following real-world scenarios:

Stage 1 – Research: John Roth, professor at University of Tennessee, consults with former student’s company on government contract for development of plasma actuators to control drone fighter-craft. Despite warnings about potential violations of ITAR, the International Traffic in Arms Regulations, carries related technology to China and allows Iranian grad student to access it. Result? Jail time for the professor.

Stage 2 – Business Plan: Commercial satellite technology in hand, MBA runs numbers and concludes that, by manufacturing in China, company can be in the black by Year Three. Venture capitalists impressed, fund two years of development. Just before sending plans to Shanghai, company learns it needs license to do so under EAR, the Export Administration Regulations, and Commerce Department declines to grant it. Result? Backers are not pleased.

Stage 3 – Commercialization: Company’s website puffs its CAD software as able to simulate missile aerodynamics, catches eye of export control official who discovers that company’s president applied for export license ten years ago but hasn’t applied since. President faces indictment for knowingly avoiding legal obligations until attorney convinces government that company is only attempting to develop missile capabilities, and company never needed the license it erroneously applied for. Result? Thousands of dollars in legal fees.

Stage 4 – Cashing Out: One eve of IPO and throwing switch on new IT system granting technology access to engineering subs in twenty-four countries, HR asks whether company can hire Chinese national and, in ensuing conversation with attorney, discovers that company has, for years, needed licenses to disclose its technology to numerous foreign-person employees. Result? IT plans shelved, IPO is withdrawn until company pays fines for hundreds of violations.

PS: It’s not just the startup that loses when violations emerge in the financing context. Purchasers must pay fines for a target’s pre-purchase violations, even if the violations go undiscovered until after the deal closes, and even if the deal was structured as an asset purchase rather than a merger.

Export Compliance NE provides the expertise you need to guide your company through compliance with this complex area of the law at every stage of the company’s development, as well as the services of an experienced export control attorney to represent the company against the government in the unfortunate event that violations occur.